GDP growth records best reading since Q4 2021 in the first quarter

According to a preliminary estimate, GDP growth picked up to 1.3% on a seasonally adjusted quarter-on-quarter basis in the first quarter, up from 0.6% in the fourth quarter of last year. Q1's reading marked an over two-year high and was more than double market expectations. On an annual basis, economic growth sped up to 3.4% in Q1, compared to the previous period's 2.2% increase. Q1's reading marked the best result since Q4 2021 and also overshot market expectations.

Private consumption accelerated to 0.8% seasonally-adjusted quarter-on-quarter in the first quarter (Q4 2023: +0.2% s.a. qoq), amid higher spending on clothing plus restaurants and accomodation. Government consumption improved to a 0.7% expansion in Q1 (Q4 2023: +0.5% s.a. qoq). Meanwhile, fixed investment rebounded, growing 1.5% in Q1, contrasting the 1.4% decrease in the prior quarter and buoyed by the construction sector. On the external front, exports of goods and services growth softened to 0.9% in Q1 (Q4 2023: +3.5% s.a. qoq), on the back of slowing exports of both goods and services. Imports of goods and services contracted 0.7% in Q1 (Q4 2023: +1.4% s.a. qoq).

On their forecasts, United Overseas Bank’s Ho Woei Chen said: “Given the strong outperformance in 1Q24, we now think that South Korea’s GDP is likely to be better than our forecast of 2.5% this year. Indicators such as the manufacturing PMI, exports, tourist arrivals, consumer sentiment and employment point to an ongoing economic recovery after the anemic 1.4% growth in 2023. As such, we raise our forecast for 2024 growth to 2.8% while maintaining the projection for 2025 at 2.4%.” In a similar vein, Nomura analysts said: “We are raising our 2024 GDP growth forecast substantially to 2.5% y-o-y from 1.9%, reflecting more resilient consumption and stronger exports. We now expect a soft landing in consumption (1.6%; previous: 0.6%), and stronger export growth (5.5%; previous: 4.4%), reflecting the AI investment boom in the US.”

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